Key insights
- The author argues Google's custom Axion CPU gives it a competitive edge in the AI era by reducing reliance on Intel and AMD. While the market rewards chip vendors, Google's internal use of Axion for cloud and YouTube infrastructure improves margins and positions them as a vertically integrated AI leader. The author suggests Google is undervalued due to its focus on internal hardware use rather than external sales.
Market finally figured out that CPUs are just as important as GPU and TPu for AI because thats where the actual code execution happens. You need the CPU for the logic, fetching data, and running cron jobs while the TPU or GPU just handles the math. Intel and AMD are ripping because people realized you cant run "agentic" AI without a massive amount of traditional CPU power to manage the workflow..
The thing is Google literally built its own custom CPU called Axion specifically to stop paying the "Intel tax" for its cloud, any TPU to stop paying “Nvidia tax” . Everyone knows Google has the TPU for training and inference, but they are also becoming a powerhouse in the CPU space for the orchestration side. They are basically the most vertically integrated company in the world right now
It’s weird that the market treats Intel and AMD like the only winners in the CPU space. Google is using its own hardware to power Youtube and their massive data centers, which should be huge for their margins. If the "AI era" requires better CPUs for execution, Google is already years ahead of most companies by designing their own ARM based chips in house.
Is the stock lagging just because they don't sell the chips to other people? It feels like investors are rewarding the companies that sell the hardware but ignoring the company that is actually using it to dominate the cloud. What am i missing here or is Google just the most undervalued hardware play since they don't have to buy from the other guys anymore.